Pricing a Book

The pricing of a book is an interesting economics problem. For economic efficiency, the price should be equal to the marginal cost. But as often happens, marginal costs are sometimes far below average costs (due to fixed costs.) So P=MC leaves a deficit in the recovery of full costs. Therefore P>MC has to be it. For ebooks, the MC=~0. But if you shift some of the deficit by pricing ebooks > 0, you reduce the deficit. I have been thinking about book pricing because we have to attach a price to my book.

For hard copies, the price has to reflect the cost of production and distribution. Actual printing costs are between $1 to $2, with the lower figure for high printing volumes. Shipping and handling costs add up to another $1. Some books have to be distributed for free — to reviewers mainly — which adds to the fixed costs. A reasonable price close to the average cost is Rs 200, and for the US, $5.

For soft copies of the book, there are two avenues of distribution. One, as a Kindle book from Amazon. Two, as a PDF download from the book website. Kindle distribution is whatever Amazon charges and a little for fixed cost recovery. I suppose $3 would be an appropriate price since the cost of printing and S&H is not incurred.

For PDF download, I think there has to be a mechanism for people to donate whatever amount they feel is appropriate. The marginal benefit from the book depends on the reader. So if you buy the book and find it makes sense and you are glad that you read it, you could try to estimate how much you value it and decide to donate that amount. For someone it may be a positive number, zero, or a negative number. Since you cannot donate a negative amount in monetary terms, I suppose the lower bound is zero.

Author: Atanu Dey

Economist.

6 thoughts on “Pricing a Book”

  1. If only it was just economics that dictated ebook pricing. Now we have the strange situation where some ebooks cost more than the printed version because of the publishers’ fear that it would cannibalize printed book sales.

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  2. every entrepreneur tries to recoup his costs alright.but whether his product will sell or not really depends on the value his customers derive out of it. it production costs were the primary factor determining prices,why is the diamond dug from the deep recesses of a mine in south africa sold at a higher price while the rocks/stones at the same depth -which require as much cost to dig up ,are sold at very cheap rates?
    all value is subjective.the marginal calculation,if any,should apply to the consumer and not the producer.what utility can the market derive on the margin from the product you are selling/book you are peddling.that should determine the price.
    the market doesnt care if you spend 10 million or 10 rupees to create your product.what is pertinent is the value your buyer gains on the margin
    ps: did you miss the marginal revolution of the 19th century in your textbooks

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  4. Atanu
    grand! i look forward to reading the book, if not a print copy, an e-book.
    if you were Ayn Rand, you would use some of your own (large stash of) money to propagate the message 🙂

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  6. I will buy the book anyway, but for a book of your size it could have been priced in India at Rs.100/-. The secret of success of fiction titles like those by Chetan Bhagat was its attractive pricing by Rupa at < 100. For a small book of sub 200 pages, i think its feasible.

    Just a suggestion, as I want more people to read your books. Don't take offense

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